Good Afternoon,

We are developing a credit score-based pricing module for consumer non-RE loans. One score will be pulled at the time of application, 5 tiers of pricing. The H-4 model form is what we are planning to provide the applicant (credit score disclosure) and H-5 when applicable. I have 2 questions.

1) If the applicant withdraws an application after credit is pulled, is the credit score disclosure (H-4) required to be provided to them? I am interpreting the scope in section 1022.70 (a) (i) and (ii) to mean the disclosure is required on withdrawn files as well???

2) Section 1022.72 2 (iii) indicates that using 5 tiers or more, you are not required to provide a risk- based pricing notice to the lowest 2 pricing tiers (best rates). Is this still true in using model H-4 credit score disclosure as well?

Thanks for the help

Let's address a couple of points. You reference using Model H-4 and H-5. Those are the exception notices that are delivered under 1022.74 and not 1002.73.

1. If you are going to be using the exception notices, then the timing is found in 1022.74(b) and 1022.74(d)(3). Usually, banks work with their credit reporting agency and for a slight additional fee, the credit reporting agency just mails the disclosure automatically when the credit report is ordered. So, everyone gets one regardless.

2. If you are going to be using the exception notices, then you do not have to go through all the hassle of determining who does and does not get the notice. You just send one to everyone, except as noted in #1 above.

Due to the hassle of determining who gets an actual risk-based pricing notice and the upkeep of those statistics, I know of virtually no banks that deliver them and they opt to providing the exception notices under 1022.74.

Hope that helps.

Randy, thank you for your help but I need to understand a little more.

If we chose to provide the risk- based pricing notice instead of the credit score disclosure are we still required to provide the RBP notice on withdrawn files?

We need to understand what is meant by 1022.70(a)(1) and 1022.72(a). We interpret these sections to mean the Risk-Based Pricing notice has to be provided to consumers to who we granted credit with less favorable terms (and would therefor exclude withdrawn applications).

Thanks for the help!

It cannot be delivered before you make the decision to approve the application.

1022.73(c) Timing. (1) General. Except as provided in paragraph (c)(3) of this section, a risk-based pricing notice must be provided to the consumer:

(i) In the case of a grant, extension, or other provision of closed-end credit, before consummation of the transaction, but not earlier than the time the decision to approve an application for, or a grant, extension, or other provision of, credit, is communicated to the consumer by the person required to provide the notice;

(ii) In the case of credit granted, extended, or provided under an open-end credit plan, before the first transaction is made under the plan, but not earlier than the time the decision to approve an application for, or a grant, extension, or other provision of, credit is communicated to the consumer by the person required to provide the notice

Randy - I have the same question as Jr compl. To clarify, are we still required to provide the RBP notice on withdrawn files?

If you are using Risk-Based Pricing Notices (and I again reiterate, I have no earthly idea why a bank would choose to do that rather than using the exception notices), whether the application is withdrawn or not is not a factor. You cannot deliver the Risk-Based Pricing Notice until after the application is approved and prior to closing.

If the application is withdrawn, it is never going to close. So, if you haven't already delivered the notice, there is no reason to do so.